Here's a quick tip for those just starting a new game of Ultima IV:

Most people will tell you to stay out of Britannia's dungeons until you get stronger. These people are very, very wise. However, there is one dungeon you may want to consider poking your nose into in the early going -- Despise, located in the mountain range north of Lord British's castle. All you really need is a Sling or other ranged weapon, and a Torch (you start off with two) or Light spell. Cure spells are also highly recommended, and you start with enough reagents to mix a few Cures.

When you enter Despise, take one step forward and turn to the right. You'll see two alcoves, both of which contain fountains. The one on your right (to the west) is not only safe, it will fully heal you back to your max HP. (The other fountain is poisoned and should be avoided at all costs.) Furthermore, the connecting hallway continues to the east and ends in a room with eight Skeletons and three chests. As long as you have a Sling readied this battle won't be too tough even for a low-level character, and even the random traps in the chests won't be too much of a bother. After you clean out this room, you can run back to the healing fountain to recharge... then return to the Skeleton room and do it all over again, as often as you like (just be mindful of your light source; don't let it go out).

The room nearest to the ladder leading out of Despise (just ahead of you as you enter) is also worth checking out, but it's a slightly harder battle; Headlesses and Mimics (the latter of which can poison you). You should still be able to survive it, however. This room contains six chests (including the two dead Mimics) instead of three, and the healing fountain is still handy.

As long as you don't try going any further than these two rooms and the fountain, the first level of Despise is one of the best grinding areas you'll find in the early game. You should be able to pump your character up to at least level 5 without too much trouble, and possibly even higher if you have the patience, and line your pockets with enough gold to buy all the reagents and equipment you'll need until much later in the game.

A note on grinding:

As you´ll have noticed, if you get killed, gold and food reset to 200 each. Spare weapons and armor are apparently also lost.

But, as far as I can tell, reagents, prepared spells and tool (torches/keys/gems) remain if you are killed, so you can "take it with you when you go" if you invest it in these things.

Also, there are a couple of quest items that are easily recovered if you know where to look - most of the runes, the black and white stones, and the book of truth. That´s a nice XP boost for the main character.

People I knew used to just pass time on the bridge next to Lord British's castle. They'd kill the trolls with slings and other ranged attacks. They'd get to loot chests and could always run back to the castle for healing and curing.

People you didn't know did this, too - unless, of course, I know you from somewhere.
That troll bridge helped me grind in all three Second Trilogy Ultimas (Ultimae?), but it's likely most effective in U5. Still, if you don't mind the occasional hit with a bomb or poison trap, it's a decent place to build up power in IV. You're not too far from free healing in Castle Britannia, from provisions in Britain, and from reagents in Paws, and you're near to the moongate that'll get you to Minoc to spend some of your newfound wealth on better weapons (assuming that you're looking for better than simple bows found in Britain). That's some pretty serious benefit. The only real trouble you run in to is if something nasty comes down out of the Serpent's Spine (the mountains to the north) to give you a run for your money - I've been attacked by Ettins there which are occasionally accompanied by a Balron, for example (the worst overworld fight I ever had - nothing else has ever curb-stomped me so thoroughly); Liches pop up too, from time to time, as do Mage-backed Skeletons. Mostly, though, around there you get Orcs (which come with the occasional Troll or Giant) and Headlesses (which can bring Gazers with them).

Whether it's level, step-counter, or overall experience, I don't know, but I got nailed (in the C64 version) by the Ettins with Balron when I was at level two, with only Iolo as backup. Of course, I was on my way to British's castle to gain some levels - I had been wandering quite a while, and I needed to get some advice (I was just learning the game at the time, and we didn't have this Internet thing yet) - so I had experience enough to go to level five. If you have yourself some Nightshade, Reapers can be made reasonably simple by judicious use of the Negate Magic spell. Tremors is also handy, allowing you to hit them while not standing in line of their attacks.
But yes, as with David and Goliath, if you can hit from a long way away, you often don't have to worry about what they can do to you if they close in.

According to Richard the type of monsters that would spawn is move based not experienced based; http://codex.ultimaaiera.com/wiki/Ultima_IV#Trivia

Despise is the best gold grinding in the early game, but Hythloth is easily the best late game. The western dungeon room on level 8, which is like 2 minutes to reach, has a ton of chests, and they reset so you can loot them again just by leaving the room and then entering it again. So enter, kill the 2 balrons (annoying but late game you can easily handle them), loot the chests, leave and then enter it again for more loot. Continue until you're bored.

Just don't get your party completely depleted, as you *DO* have to fight your way through 3 more rooms to get out into open hallway so you can cast (X)it. And if you have removed the balloon, you will also need at least one (G)ate Travel spell to get somewhere useful.

Hythloth is how I earned the 15,000 gold required for the magic wands I needed to fully equip my party. The magic axes, magic bow, crossbow, and sling were not hard to buy, but those wands cost a ton.

I mean, I could have just sold my Mystic Swords, but that feels like cheating.

You might want to, especially if you're soloing, keep yourself poisoned during all this so you don't get put to sleep by enemies.

You will want to mix some Energy spells in advance, as sometimes you'll trigger a sleep trap from a chest that will remove your poison, and you *want* to be poisoned.

I believe that the crossbow and sling will not work at all in the Abyss (all attacks will miss), so you may want those characters to use Mystic Swords instead, or just leave them dead.

It's worth noting that, in the NES version, this method of earning money doesn't work so well; you want to look for hallway chests since there are far fewer room chests, and the method of selling Mystic Swords won't work on NES (you only get one, and the game won't let you sell it). Note that this is different from the NES version, where the strength of enemy spawns actually is based on your level. One strategy for the NES version is to stay at level 4, which is high enough for ships to spawn but not high enough for overworld enemies to put you to sleep. (Ultima 3 NES is also like this. Don't know about Ultima 5 NES, but that version is a piece of kuso garbage anyway.) In the NES version:
* Gold gets reset to 400. (There is no food in the NES version.)
* Spare weapons and armor are *not* lost; this allows you to save money over a death, and to stock up on money by deathwarping. (Of course, you need 2000 gold to get the key to enter Hythloth, so using the orb there to suicide isn't an option early on.)
* Quest items do not give XP bonuses. (Fortunately, level 4 is enough to beat the NES version, unlike other versions which demand that you reach level 8.)

By the way, don't skip levels; if you do, you will only get the stat boosts from one level even if you gain more than one at a time. (For example, when starting as a Mage, don't get both the Rune of Honesty and the Black Stone before reaching Lord British, as if you do, you'll skip level 3.) And, of course, you would have missed out on 2 levels worth of stat gains (though that can be fixed with orbs).